“If this works — if Promesa works and the restructuring works — it may make bankruptcy for states seem like something that lawmakers should be considering a little more seriously,” said David A. Skeel Jr., a University of Pennsylvania law professor who is on the oversight board and has written on the possibility of states using bankruptcy. “But if it doesn’t work, it would have the opposite effect.”
The NYT article describes what looks like a preview of what is coming to Illinois. What is proposed in PR – and merely proposed and likely subject to litigation – has pensioners vaulting over the rights of bond holders to receive no or very little haircut to their pensions. And the best class of bond holders take a 36 percent reduction, with 2012 and 2914 taking much bigger haircuts than that. The social issues and emotions are raw – the people in PR by and large are very poor – so there is in a sense no choice but to… Read more »
It looks as if a lot will depend on the 2020 election and the makeup of the judiciary. Elizabeth Warren is likely to seek bail-outs all around, with major haircuts for Wall St. And she is a bankruptcy specialist. Should that turn out to be reality, what should mere taxpayers expect and are there any steps that we can take to protect ourselves? One would expect that the doors of the credit markets would slam shut for states and municipalities, but if all outstanding debt were to be “resolved” through negotiation or cram-down, the states and their political subdivisions would… Read more »